January 8th, 2019 10:30 AM by Richard Sardella MLO.100007700/NMLS 233568
The stock market is continuing to shake off the negative vibes, and the bond and mortgage markets are in corrective consolidation.
US/China trade talks continued for the second day; no details have emerged. The first step they say is the hardest, and the clock is ticking on the 90-day truce Trump announced a few weeks ago. Yesterday Wilbur Ross (commerce Sec) talked optimistically saying that Beijing and Washington could reach a trade deal that “we can live with.” Trade issues are the easiest to work out, but the rub that isn’t likely to be easy is the structural issues (intellectual property rights and market access). Both countries need a deal; China’s economy is slipping, and the US outlook for 2019 isn’t very rosy. At 9:30 am ET the Dow Jones was reporting progress being made in the talks.
The Dec NFIB small business optimism index at 104.4 down from 104.8, still strong. Accounting for most of the modest decrease was a drop of 6 points to a net 16% in expectations that the economy will improve over the next 6 months, a 5-point decrease to a net 24% in the view that now is a good time to expand, and a 4-point decrease to a net 25% in plans to make capital outlays. Diminished optimism was also seen in earnings trends, which fell further into negative territory with a 3-point drop to minus 7%, as well as expectations of higher retail sales, which fell 1 point to a net 23%. Expected credit conditions were also down 1 point to a net minus 6%.
Yesterday the White House announced President Trump would address the nation last night until someone told them the national college football championship was on. The address quickly moved to tonight. The President is expected to make his case to the people about why the southern border should be closed (fenced) and what makes it a national emergency. The address at 9:00 pm est. He has to generate enough support to convince House Democrats to provide $5.1B he is asking for. Democrats are asking for equal air time to respond so far only CNN has agreed. At stake is the government shutdown now in the 18th day.
At 9:30 the DJIA opened up +270, the NASDAQ up +71, and the S&P +26. The 10 yr. stood at 2.71%, up +2 bp.
At 10:00 am Nov JOLTS job openings were at 6.888 mil from 7.131 mil in October.
November US trade deficit delayed due to the shutdown. Yesterday November factory orders and durable goods data were also delayed. Economic data, the food for economists, are being delayed and as long as the shutdown continues more data will be absent. Markets are turning to private sector reports such as ISM yesterday for information. The delays in key gauges of the economy are likely to make already-skittish markets more volatile if it continues much longer.
This afternoon at 1:00 pm Treasury will auction $38B of 3-yr notes; tomorrow $24B of 10s and Thursday $16B of 30s. The auctions this week will carry additional interest in demand with the recent decline in interest rates.
The bond and mortgage markets continue to weaken as we expected. Mortgage market being hammered especially hard as investors rush to lock all of the floated loans that accumulated over the last three weeks.
PRICES @ 10:00 AM
10 yr. note: -2/32 (6 bp) 2.70% +1 bp
5 yr. note: -3/32 (9 bp) 2.56% +2 bp
2 Yr. note: -2/32 (6 bp) 2.56% +2 bp
30 yr. bond: -1/32 (3 bp) 2.99% unch
Libor Rates: 1 mo. 2.511%; 3 mo. 2.796%; 6 mo. 2.848%; 1 yr. 2.994%
30 yr. FNMA 4.0: @9:30 101.86 -14 bp (-31 bp from 9:30 yesterday)
15 yr. FNMA 3.5: @9:30 101.34 -3 bp (-22 bp from 9:30 yesterday)
30 yr. GNMA 4.0: @9:30 102.44 -16 bp (-16 bp from 9:30 yesterday)
Dollar/Yuan: $6.8535 +$0.0025
Dollar/Yen: 108.88 +0.16 yen
Dollar/Euro: $1.1441 -$0.0035
Dollar Index: 95.97 +0.31
Gold: $1282.10 -$7.80
Crude Oil: $49.43 +$0.96
DJIA: 23,764.00 +232.69
NASDAQ: 6869.84 +46.37
S&P 500: 2567.76 +18.07
Richard Sardella has been actively managing and providing services in the mortgage industry for over 27 years. Richard serves on the board of directors as President of Colorado Home Mortgages Inc.
All information furnished has been forwarded to you and is provided by thetbwsgroup only for informational purposes. Forecasting shall be considered as events which may be expected but not guaranteed. Neither the forwarding party and/or company nor thetbwsgroup assume any responsibility to any person who relies on information or forecasting contained in this report and disclaims all liability in respect to decisions or actions, or lack thereof based on any or all of the contents of this report.
MLO of record MLO.100007700 / NMLS#233568 / CHM NMLS#127716.